Wired News – BHP Billiton Offloads US Onshore Oil and Gas Assets to UK’s Energy Major BP
LONDON, UK / ACCESSWIRE / July 31, 2018 / If you want access to our free research report on BHP Billiton Ltd (NYSE: BHP) (“BHP”), all you need to do is sign up now by clicking the following link www.active-investors.com/registration-sg/?symbol=BHP as the Company’s latest news hit the wire. On July 27, 2018, the Company announced that it has signed agreements with BP PLC (NYSE: BP) and others to divest 100% of its onshore oil and gas business in the US. The all-cash deal is valued at approximately $10.8 billion. Register today and get access to over 1,000 Free Research Reports by joining our site below:
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BHP expects that the divestment will enable it to simplify and strengthen its business operations, pay off debts, and provide value and returns to its shareholders.
Comments from Management
Commenting on the sale of the US onshore oil and gas assets, Andrew Mackenzie, Chief Executive Officer (CEO) of BHP, said:
“The sale of our Onshore US assets is consistent with our long-term plan to continue to simplify and strengthen our portfolio to generate shareholder value and returns for decades to come.”
Bob Dudley, Group Chief Executive of BP, stated:
“This is a transformational acquisition for our Lower 48 business, which is a major step in delivering our Upstream strategy and a world-class addition to BP’s distinctive portfolio.”
Details of the Divestment
As per the terms of the divestment, BHP Billiton Petroleum (North America) Inc. has agreed to sell 100% of issued share capital of Petrohawk Energy Corp., which is a wholly-owned subsidiary of BHP, to BP America Production Co., which is a wholly-owned subsidiary of BP PLC. Petrohawk owns assets at Eagle Ford, Haynesville, and Permian Basin. BP American has agreed to pay $10.5 billion in cash for Petrohawk’s assets. Initially, BP America will pay half of the agreed amount, subject to adjustments at the time of completing the deal; and the balance half of the payment (deferred consideration) will be payable within the next six months in six equal instalments. The second half of the consideration is not subject to any conditions.
Additionally, the entire share capital of BHP Billiton Petroleum (Arkansas) and the 100% membership interests in BHP Billiton Petroleum (Fayetteville) LLC has been divested to MMGJ Hugoton III, LLC (“MMGJ”), which is a Company owned by Merit Energy Co. Both BHP Companies hold the Fayetteville assets. MMGJ has agreed to pay these BHP Companies $0.3 billion for the Fayetteville assets. The consideration amount is subject to adjustments at the time of the closing of the deal.
These deals are effective as on July 01, 2018. BHP has indicated that the above divestments are expected to be completed by the end of October 2018, subject to the receipt of regulatory approvals and other closing conditions. BHP will continue to operate the divested assets until the completion of the deal, and it will ensure that the transition of the business to BP is completed smoothly.
BHP expects to incur a one-time impairment charge of approximately $2.8 billion post-tax (approximately US$2.9 billion pre-tax) as a result of this deal. The Company plans to classify this one-time impairment charge as an exceptional item when compiling its financial results for FY18. The Company also expects that it will incur approximately $0.2 billion as income tax as a result of the divestments. However, the estimated cash tax payable will be less than $0.1 billion after considering the carried forward tax losses of the BHP’s groups consolidated US tax.
The proceeds from the assets sale will allow BHP to pay off a significant portion of its debts, and it will be able to allocate part of the proceeds to pay returns to its shareholders. The Company will be making an announcement in this matter at the time of the completion of these divestments.
BHP’s Divested US Onshore Oil And Gas Assets
The divested assets include entire interests in the Eagle Ford, Haynesville, Permian fields, and Fayetteville Onshore US oil and gas assets. The assets in Eagle Ford, Haynesville, and Permian fields consist of 526,000 net acres and the Company-produced oil, gas, and natural gas liquids which were sold by BHP domestically in the US. These assets produced a total of 58.8 million barrels of oil equivalent (Mboe) in FY18.
The Fayetteville Onshore US oil and gas assets are in north central Arkansas, and consist of approximately 268,000 net acres. The production from these assets was 13.3 Mboe (including 79.9 billion cubic feet of gas) for FY18.
Effect of Acquisition on BP
The acquisition of BHP’s assets is one of the largest deals made by BP in a long time, and it is a great opportunity for BP to expand its footprint in the US shale business. The deal sees BP emerging from the $65 billion payments as penalties and clean-up, as well as the backlash faced due to the Deepwater Horizon accident and the Gulf of Mexico oil spill in 2010.
The acquisition will allow it to gain high-quality oil and gas assets in the resources rich Permian and Eagle Ford basins in Texas, and in the Haynesville gas basin in Texas and Louisiana. The total production from these assets is approximately 190,000 barrels of oil equivalent per day (boe/d).
BP plans to merge the acquired BHP’s onshore US business with its existing US onshore business. David Lawler, the current CEO of BP’s US onshore business will head the merged entity.
BP expects the deal to be accretive to its earnings per share (EPS) and cash flows, and will increase BP’s onshore production from 14% to 27%, and onshore resources from 17% to 29%. BP also expects the deal to result in over $350 million in annual pre-tax synergies and savings.
About BHP Billiton Ltd
BHP’s global headquarters are at Melbourne, Australia. It is a multinational mining, metals, and petroleum Company that extracts and processes minerals, oil, and gas and sells them worldwide. The Company has a global sales network and is supported by over 60,000 employees and contractors.
About BP PLC
BP is a global energy Company based in London, UK. The Company explores and produces oil and gas on land and offshore. The fuels and raw materials manufactured and sold by the Company are used in thousands of everyday products, from mobile phones to food packaging. The Company has a global presence in over 70 countries and is supported by a team of over 74,000 employees.
Stock Performance Snapshot
July 30, 2018 - At Monday’s closing bell, BHP Billiton’s stock rose 1.06%, ending the trading session at $51.30.
Volume traded for the day: 2.50 million shares, which was above the 3-month average volume of 2.31 million shares.
Stock performance in the last month – up 2.56%; previous three-month period – up 9.73%; past twelve-month period – up 24.70%; and year-to-date - up 11.55%
After yesterday’s close, BHP Billiton’s market cap was at $136.53 billion.
Price to Earnings (P/E) ratio was at 20.96.
The stock has a dividend yield of 4.29%.
The stock is part of the Basic Materials sector, categorized under the Industrial Metals & Minerals industry. This sector was up 0.6% at the end of the session.
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